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So now you can buy bitboin without actually buying bitcoin... wow. Expose yourself to all the volatility, all the harsh swings and market manipulation by crypto

by s3p 3y ago

So now you can buy bitboin without actually buying bitcoin... wow. Expose yourself to all the volatility, all the harsh swings and market manipulation by crypto whales, all while owning none of the currency. Sounds awful.

gberger 3y ago
Owning actual cryptocurrency is a huge hassle with concerns about key storage, hot vs cold wallets, etc. Investors are much more likely to already have the infrastructure in place to hold an asset like an ETF, so offering bitcoin wrapped in an ETF presents the opportunity to these investors to get exposure to crypto valuations without getting exposed to crypto hacks.
- Our_Benefactors 3y ago
  > so offering bitcoin wrapped in an ETF presents the opportunity to these investors to get exposure to crypto valuations without getting exposed to crypto hacks. Every few years I hear about a bitcoin ETF and it seems like even worse of a scam than holding cryptocurrency directly. Clearly I’m too dumb (or too smart?) to understand how an ETF can tie itself to the value of bitcoin without also including a freely available redemption mechanism. Does it? If the value of my shares is equal to 1BTC (or whatever other cash out threshold), will they send Bitcoin to an address I specify? Is the ETF fully backed by bitcoin in a publicly auditable fashion?
  - junofan 3y ago
    No, AFAIK the fund sells shares to buy Bitcoin and sells Bitcoin to buy shares.
  - rocqua 3y ago
    There are a few parties (called Authorized Participants) who are allowed to mint ETF shares by handing the fund the underlying, or redeem ETF shares in return for the underlying. These APs are chosen carefully, and have the express job of creating liquidity. They make their money on arbitrage, thus keeping the ETF price closely matched to that of the underlying.
  - modeless 3y ago
    The answers to these questions and more are publicly available here: https://www.sec.gov/Archives/edgar/data/1980994/000143774923017574/bit20230608_s1.htm https://www.sec.gov/Archives/edgar/data/1980994/000143774923... > An investment in Shares is: Backed by bitcoin held by the Bitcoin Custodian on behalf of the Trust. > Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must be a registered broker-dealer, a participant in DTC, have entered into an agreement with the Sponsor and the Trustee (the “Authorized Participant Agreement”) and be in a position to transfer bitcoin to, and take delivery of bitcoin from, the Bitcoin Custodian through one or more accounts. The Authorized Participant Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of bitcoin in connection with such creations or redemptions. A list of the current Authorized Participants can be obtained from the Trustee or the Sponsor. This is all very standard and no more or less of a scam than other ETFs.
  - jyap 3y ago
    An ETF generally requires a redemption mechanism. In the case of the BlackRock ETF it’s in the application. “Baskets may be created or redeemed only by Authorized Participants who pay BlackRock Investments, LLC”. No you can’t personally physically redeem the Bitcoin yourself. That’s not the purpose and use of this ETF.
coolestguy 3y ago
It's a spot etf
jjtheblunt 3y ago
https://www.investopedia.com/terms/e/etf.asp https://www.investopedia.com/terms/e/etf.asp https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-2 https://www.investor.gov/introduction-investing/investing-ba... I think there's no buying X involved with an index ETF over X, in general, and I believe they are talking about an index etf here. (Of course, it still is some sort of gamble to trade in an index ETF.)
delabay 3y ago
I see you've never had a conversation with a company interested in holding crypto assets but upon further investigation, realize it's essentially impossible given the way business is structured. Custody is a spectrum, self custody is more towards cyber punk than white collar. People clearly want these assets and I predict the Bitcoin etf, when finally launched, will have the largest opening volume of any etf ever.
- maxbond 3y ago
  Will the ETF units work better for these companies than the contracts CME offers? Why is that? Because they don't need to be rolled over? Because they're smaller fractions? Because they're fully collateralized?
  - rocqua 3y ago
    Not rolling should help a lot. Also, having the price set by continuous arbitrage instead of discrete auctions might reduce slippage. I recall the futures were trading at quite the discount to real bitcoin prices.

by s3p 3y ago

gberger 3y ago

Owning actual cryptocurrency is a huge hassle with concerns about key storage, hot vs cold wallets, etc. Investors are much more likely to already have the infrastructure in place to hold an asset like an ETF, so offering bitcoin wrapped in an ETF presents the opportunity to these investors to get exposure to crypto valuations without getting exposed to crypto hacks.

Our_Benefactors 3y ago
> so offering bitcoin wrapped in an ETF presents the opportunity to these investors to get exposure to crypto valuations without getting exposed to crypto hacks. Every few years I hear about a bitcoin ETF and it seems like even worse of a scam than holding cryptocurrency directly. Clearly I’m too dumb (or too smart?) to understand how an ETF can tie itself to the value of bitcoin without also including a freely available redemption mechanism. Does it? If the value of my shares is equal to 1BTC (or whatever other cash out threshold), will they send Bitcoin to an address I specify? Is the ETF fully backed by bitcoin in a publicly auditable fashion?
- junofan 3y ago
  No, AFAIK the fund sells shares to buy Bitcoin and sells Bitcoin to buy shares.
- rocqua 3y ago
  There are a few parties (called Authorized Participants) who are allowed to mint ETF shares by handing the fund the underlying, or redeem ETF shares in return for the underlying. These APs are chosen carefully, and have the express job of creating liquidity. They make their money on arbitrage, thus keeping the ETF price closely matched to that of the underlying.
- modeless 3y ago
  The answers to these questions and more are publicly available here: https://www.sec.gov/Archives/edgar/data/1980994/000143774923017574/bit20230608_s1.htm https://www.sec.gov/Archives/edgar/data/1980994/000143774923... > An investment in Shares is: Backed by bitcoin held by the Bitcoin Custodian on behalf of the Trust. > Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must be a registered broker-dealer, a participant in DTC, have entered into an agreement with the Sponsor and the Trustee (the “Authorized Participant Agreement”) and be in a position to transfer bitcoin to, and take delivery of bitcoin from, the Bitcoin Custodian through one or more accounts. The Authorized Participant Agreement provides the procedures for the creation and redemption of Baskets and for the delivery of bitcoin in connection with such creations or redemptions. A list of the current Authorized Participants can be obtained from the Trustee or the Sponsor. This is all very standard and no more or less of a scam than other ETFs.
- jyap 3y ago
  An ETF generally requires a redemption mechanism. In the case of the BlackRock ETF it’s in the application. “Baskets may be created or redeemed only by Authorized Participants who pay BlackRock Investments, LLC”. No you can’t personally physically redeem the Bitcoin yourself. That’s not the purpose and use of this ETF.

coolestguy 3y ago

It's a spot etf

jjtheblunt 3y ago

https://www.investopedia.com/terms/e/etf.asp https://www.investopedia.com/terms/e/etf.asp https://www.investor.gov/introduction-investing/investing-basics/investment-products/mutual-funds-and-exchange-traded-2 https://www.investor.gov/introduction-investing/investing-ba... I think there's no buying X involved with an index ETF over X, in general, and I believe they are talking about an index etf here. (Of course, it still is some sort of gamble to trade in an index ETF.)

delabay 3y ago

I see you've never had a conversation with a company interested in holding crypto assets but upon further investigation, realize it's essentially impossible given the way business is structured. Custody is a spectrum, self custody is more towards cyber punk than white collar. People clearly want these assets and I predict the Bitcoin etf, when finally launched, will have the largest opening volume of any etf ever.

maxbond 3y ago
Will the ETF units work better for these companies than the contracts CME offers? Why is that? Because they don't need to be rolled over? Because they're smaller fractions? Because they're fully collateralized?
- rocqua 3y ago
  Not rolling should help a lot. Also, having the price set by continuous arbitrage instead of discrete auctions might reduce slippage. I recall the futures were trading at quite the discount to real bitcoin prices.